Broker Help Guide - How to Choose a Forex Broker?
For any Forex trader, the inevitable question emerges: "Which Forex broker is the best? We highlight the most important issues you need to know.
A thorough comparison of brokers reveals that they are not all equal. Each broker operates a different fee structure, technologies, customer services and market access.
Some brokers are specialised and only offer Forex trading while other brokers also allow you to trade equities, futures and CFDs.
What are the costs?
Brokers earn their keep through the feeds traders pay- understand these fees. A significant source of revenue (for your broker) and operating expense (for you - the trader) will be the spread - the price difference between the bids and ask prices. Know how your broker handles spreads:
Q: Are spreads fixed or variable?
Q: What is the average (and max) spread for each of the currency pairs of interest?
Q: What are the spreads during very illiquid times, or during times of high volatility?
Q: Are there commissions per trade in addition to the spread?
A trader must also determine how a broker handles rollover debits and credits. Some brokers both debit and credit a trader's account for rollover, other brokers only debit your account (so you won't earn credit for carry traders).
Q: How is rollover handled?
Q: What interest rates are used to settle rollover?
Make sure you understand all potential fees your broker could charge you.
Q: Are there any requirements to make a minimum number of traders in a given time period?
Q: Are there any "account maintained" fees? Minimum balance fees?
Q: Do I pay anything for the charting package/software?
What platforms do the Broker offer?
A broker platform is the computer system that allows users to trade online with the broker as a middle-man. The platform will give up to date market prices and can automatically impletement desired trading stategies. These platforms are held to high standard for encryption and security. One should reseach the available trading platforms of a broker to establish which platform the trader feels most comfortable with from a trading and security point of view.
Another important factor will be the degree of the leverage your broker offers. Some brokers only offer a conservative amount of leverage - say between 2:1 and 10:1. Other brokers will allow more aggressive trading, with leverage up to 400:1.
For this factor, there is no best of better option - it's simply matter of making sure your broker offers what you need. If you choose to employ a trading strategy that requires 200:1 leverage - make sure your broker offers it.
Attempt to determine how well your chosen broker executes orders. This is difficult to determine by asking a company representative questions - they will all say their order execution is superior. Instead, get a feel for how quickly order are processed. What is the average between the price your requested and the price you get filled on?
Charting & Education
The charting services, as well as the educational services, your broker provides will aid in your mastery of the Forex market. When choosing a broker, consider the functionality or the charting package the offer. Sure, you do have the option to choose one broker for order execution and a separate stand - alone charting package, but most traders prefer to utilize a broker that has a superior charting package. Likewise, most broker offer a variety of educational tools to assist in trader's assessment of the Forex market.
Customer Service & Support
Like all businesses - brokers depend on their customers. Make sure the broker you choose values you as much as they should. Make sure that the broker offer all the facility to open a new account.